Key Takeaways
- SK hynix’s third-quarter operating profit jumped 632% from a year earlier, and the company said it expects the memory shortage to last through 2030.
- Jim Cramer says Micron should be the biggest winner, since its stock trades in step with SK hynix’s.
- Analysts expect Micron’s earnings to peak in fiscal 2028, and its forward P/E is in line with where it traded at the top of the last memory cycle.
- If the shortage runs anywhere near 2030, Micron’s estimates and its multiple both look too low, and its December report is the next test.
SK hynix (SKHY) just put a date on the end of the memory shortage. That date is further out than Wall Street’s numbers for Micron Technology (MU) assume.
SK hynix’s third-quarter operating profit jumped 632% from a year earlier to 83.3 trillion won (about $62.7 billion), an 80% operating margin. With its results, the company said it expects the memory supply shortage to last through 2030. It also said long-term agreements already cover more than half of its 2027 and 2028 production capacity.
Its US-listed shares jumped 12% this morning, and Micron rose 5% as chip stocks climbed for a third straight day.
Jim Cramer’s take on X:
“If SK Hynix could rally that much on 2028 visibility then Micron should be the biggest winner today…”
He’d know. On Tuesday’s Mad Money, Cramer told a caller that “Micron, unfortunately, is trading with SK Hynix. And whatever SK Hynix in Korea does, Micron does.” He’d like to see that link break someday.
Today, it’s working in Micron’s favor.
The shortage is already in Micron’s numbers
Micron doesn’t need SK hynix to tell it memory is scarce. Its gross margin went from 2.7% in fiscal 2023, the bottom of the last downturn, to 80.7% in fiscal 2026 (the year ended Sept. 3)…
Price did nearly all of that work. Management says DRAM prices rose about 180% and NAND prices about 200% in fiscal 2026, while bit shipments of each grew in the mid-20% range.
TIKR tracks 49 analysts on Micron. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Micron, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Micron’s Analyst Ratings
Wall Street’s estimates stop short of 2030
Analysts expect those prices to keep lifting earnings for two more years. Consensus has Micron’s normalized EPS climbing from $75.52 in fiscal 2026 to $176.58 in fiscal 2027 and $206.89 in fiscal 2028…
Then the estimates roll over. The 10 analysts with a fiscal 2029 forecast have EPS slipping to $203.33, and consensus gross margin falls from 87.0% in fiscal 2027 to 65.5% in fiscal 2030. SK hynix expects supply to still be short in those years. If it’s right, the back end of these estimates has room to rise.
The stock is priced for an even earlier end. Micron traded at 5.3x forward earnings at Tuesday’s close, well under its 9.9x median at quarter-ends since 2014. That’s in line with where it traded in 2017 and 2018, when the last cycle peaked. (It’s still under 6x after today’s gain.)
Back then, the market was right: Micron’s EPS fell 79% from fiscal 2018 to fiscal 2020.
Micron has locked up buyers of its own
SK hynix’s long-term agreements only cover SK hynix’s capacity. So its outlook only carries over if Micron can see that far ahead with its own customers.
It can. In September, management said more than 75% of Micron’s 2027 output is already committed. It also estimates that 26 multi-year customer agreements cover over 35% of revenue through 2030. And after meeting Micron’s executives earlier this week, Bank of America’s Vivek Arya said memory deals now run three to five years, up from a year or less before, and that Micron is already discussing supply for 2031.
The shortage has to outlast the new fabs
The risk is the capacity coming online in 2027 and 2028: Micron’s own new fabs, its rivals’ and China’s ChangXin Memory Technologies’. The last time supply caught up, Micron’s gross margin fell from 45.2% to 2.7% in a single year.
My take: Micron’s estimates and its multiple both price a cycle that ends around 2028, and the world’s second-biggest memory maker just said the shortage runs through 2030. If SK hynix is even close, Micron has plenty of upside from here.
Of course, the first real test is Micron’s fiscal first-quarter report in December, which management has called the year’s gross-margin floor.
So what is Micron stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
